SA to respond to UK bulk wine exports

22 August 2012

South Africa will be looking to counter the impact of a decision by United Kingdom retailers to import local wine in bulk and bottle it in the UK, both by engaging with the UK government and retailers, and by developing a strategy for the sustainable development of the local industry.

Following its fortnightly meeting, the Cabinet said on Wednesday that it had noted the impact of the decision by UK retailers to switch from importing bottled wine from South Africa to importing bulk wine which is then bottled in the UK.

Speaking at a media briefing in Pretoria, the chief director for agro-processing in the Department of Trade and Industry, Stephen Hanival, said South Africa had a long and very strong relationship with the United Kingdom at both the trade and political level.

He hoped the developments around bulk wine exports would not adversely trade between South Africa and the UK or any of the European Union countries with which SA trades.

In the 2011/12 period, 52% of South Africa’s certified wine was exported in bulk. In 2006 the number was around 35%.

“There’s been a very significant swing in the volume of bulk wine leaving the country,” said Hanival.

Socio-economic costs

He added that part of the decision by the UK was due to the work of a UK-based NGO that advocates bulk wine exports from developing countries such as SA, citing environmental concerns.

“It appears as though the NGO has not taken account of the socio-economic costs to an economy like SA from exporting wine in bulk,” Hanival said. “Wine in bulk means that we don’t have the value addition in South Africa, we don’t have the brand identity associated with South Africa’s very high quality wine.”

The decision is likely to affect the development of other ancillary and downstream industries such as the glass bottle industry.

“This is a serious risk to the SA wine industry,” Hanival said. “We are led to believe that the retailers in the UK would like to import wine from SA in bulk mainly because it’s slightly cheaper and allows them to bottle it within their economies and add value in their economies, rather than in a developing country such as South Africa.”

Sustainable wine industry strategy

To reduce the impact of the bulk import move, the Cabinet has approved the development of a process to come up with a five-year strategy to place the industry on a sustainable growth trajectory and reduce the environmental costs of producing wine in South Africa.

The Cabinet has also approved a consumer awareness programme to improve consumers’ understanding of holistic environmental monitoring indicators; an in-depth cross-sectoral research and analysis of the wine value-chain; as well as a study on the impact of possible bulk imports of whisky from the United Kingdom.

“We are certainly not hoping for a trade war with either the UK or the EU, but we want firm and robust engagement with our trade partners when South African interests in the wine industry or any other manufacturing sector are potentially going to be undermined,” said Hanival.

“It is within that context that we’re looking to engage the UK government, its major retailers as well as the local wine industry to ensure that, where we can improve competitiveness, we do so.”